Flipping Fixer-Uppers Not As Easy As It Looks On TV
By ILYCE GLINK And SAMUEL J.
TAMKIN
Tribune Content Agency
My wife and I live in Northern Virginia and will be retiring soon. We plan to move to Raleigh. We enjoy watching shows about buying fixer-uppers.
We’re wondering how we might go about locating a company to help us fix up homes in the Raleigh area. How would we check out the creativity and quality of their work? Anything else we should think about?
We, too, have enjoyed TV shows that depict the process of buying homes, renovating those homes and then selling them for a profit as a positive experience. Life always seems to work out — and typically in 60 minutes or less.
But “reality” TV is one thing, and the real world of real estate is quite another. We’re not saying that what you see on TV is not real, but real estate purchases, remodels and resales rarely go according to plan.
That said, lots of people have made a great living buying, fixing up and reselling (or renting) properties. Raleigh has a strong economic climate, low unemployment and lots of moderately priced homes.
The first thing you need to have is a deeper knowledge of the local market. If you don’t understand real estate or the market in which you plan to invest, you’ll set yourself up for a boatload of expensive trouble.
If you understand real estate, you’re one step ahead of most other investors. By this we mean that you understand what drives real estate markets, you know the different types of housing options, you know the differences between neighborhoods and school districts, and you are up to date on crime statistics, home sale statistics and any business issues affecting real estate.
You also need some knowledge of local construction methods, a design sense and the ability to understand numbers and costs. You must understand whether the market will support improving that home and how much you can put into the home before you price yourself out of the market.
So, build a great team of people to help you out.
Start with a smart real estate agent who will help you understand the neighborhoods. Perhaps the agent will know some great contractors and subcontractors (painters, tilers, carpenters, etc.) who can help. Finally, if you’re doing major work, you’ll probably need an architect who can help with structural or design issues, and an attorney who can help close on the property, or who can help with pulling permits or crafting lien waivers for the work you plan to do.
Once you’ve built a good team, you might be ready to tackle your first project. However, if you’re looking to find someone to do it all for you, like a turnkey developer, we’re not sure how you would find that person.
Everyone up and down the chain makes money on every aspect of the real estate transaction. If you have a contractor or construction supervisor do everything for you, you might not have much (or any) money left over as profit.
Have you noticed how on the TV shows, problems generally get solved in what seems like an instant? In our years of investing in real estate, we’ve never found that to be the case.
Keep in mind that real estate investing isn’t for the fainthearted and you have to go in knowing that few deals will play out the way they do on TV. With that attitude, a great team behind you and a ton of research and smarts, you might break even on your first deal, or maybe even make a few bucks.